State compensation exceeds private sector’s, study shows

A new study shows average total compensation of state employees — excluding teachers and law enforcement — substantially exceeds compensation for workers in Delaware’s private sector who have similar levels of education and experience.

A Delaware Public Policy Institute study found state employees earn about 12.4 percent less than similarly qualified private-sector workers but they receive benefits packages 53 percent to 102 percent more generous than most private sector workers. Health coverage, retiree health plans and pension benefits are substantially more generous for state employees.

The average Delaware state government employee in the sample earned an annual salary of $48,967 plus annual benefits received in that year or accrued toward retirement of $36,563 and $48,230, depending upon the method used to value the accrual of future pension benefits.

A private sector employee with similar qualifications would receive about $55,039 in annual salary, but only about $23,775 in additional benefits.

The study found the total salary and benefits package for state employees ranged from $88,530 to $97,197 on average — much higher than the comparable private employee package of about $78,814.

The report specifically excludes local government employees, public school teachers and public safety workers, since those workers have different salaries and may participate in different health and pension plans.

It projected Delaware could save between $260 million and $720 million if it were to compensate employees at market rates.

“Pensions, health coverage and retiree health care programs are the three key elements of compensation that are most generous relative to the private sector; they are also growing rapidly.” said Bill Osborne, interim president of the institute.

The study was conducted by Andrew G. Biggs, who studies public-sector pay and benefits at the American Enterprise Institute.

Decisions related to salary and benefit plans for state employees are under discussion in the Delaware General Assembly. Two recent studies — the Delaware Expenditure Review Committee established by Gov. Jack Markell and the Delaware Business Roundtable’s Study of State Finances — identified personnel costs as a major cost driver of the state budget.

Both studies noted that the significant areas of expenditure growth associated with personnel are in employee health care, pension and retiree health care.

The complete report, titled “Unequal Pay: Comparing State & Private Sector Employee Compensation in Delaware,” is available here.

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